[G.R. No. 129916.
March 26, 2001] 355 Scra 157 Disagreeing with the position taken by
MAGELLAN CAPITAL MANAGEMENT
CORPORATION and MAGELLAN CAPITAL
HOLDINGS CORPORATION, petitioners,
vs. ROLANDO M. ZOSA and HON. JOSE P.
SOBERANO, JR., in his capacity as Presiding
Judge of Branch 58 of the Regional Trial Court
Of Cebu, 7th Judicial Region, respondents.
FACTS:
March 18, 1994 – a management agreement
were entered between Magellan Capital Holdings
Corporation [MCHC] and Magellan Capital
Management Corporation [MCMC] the latter being
appointed as the manager for the operation of its
business and affairs of the prior.
MCHC, MCMC, and private respondent
Rolando M. Zosa entered into an "Employment
Agreement" designating Zosa as President and
Chief Executive Officer of MCHC.
Under the "Employment Agreement", the
term of respondent Zosa's employment shall be co-
terminous with the management agreement, or until
March 1996,[2] unless sooner terminated pursuant to
the provisions of the Employment Agreement.
May 10, 1995 - majority of MCHCs Board of
Directors decided not to re-elect respondent Zosa as
President and Chief Executive Officer of MCHC on
account of loss of trust and confidence[4] arising from
alleged violation of the resolution issued by MCHC's
board of directors and of the non-competition clause
of the Employment Agreement.[5]
Nevertheless, respondent Zosa was elected
to a new position as MCHC's Vice-
Chairman/Chairman for New Ventures
Development.
September 26, 1995 - Zosa communicated
his resignation for good reason from the position of
Vice-Chairman under paragraph 7 of
the Employment Agreement on the ground that said
position had less responsibility and scope than
President and Chief Executive Officer. He
demanded that he be given termination benefits.
October 20, 1995 - MCHC communicated its
non-acceptance of respondent Zosa's resignation
for good reason, but instead terminated him for
cause. He was further advised that he shall have no
further rights under the said Agreement or any
claims against the Manager or the Corporation
except the right to receive within thirty (30) days from
November 19, 1995.
petitioners, respondent Zosa invoked the Arbitration
Clause of the Employment Agreement.
23. Arbitration. In the event that any dispute,
controversy or claim arises out of or under any
provisions of this Agreement, then the parties hereto
agree to submit such dispute, controversy or claim
to arbitration as set forth in this Section and the
determination to be made in such arbitration shall be
final and binding.
Arbitration shall be effected by a panel of
three arbitrators. The Manager, Employee and
Corporation shall designate one (1) arbitrator
who shall, in turn, nominate and elect who
among them shall be the chairman of the
committee.
Any such arbitration, including the rendering
of an arbitration award, shall take place in Metro
Manila. The arbitrators shall interpret this
Agreement in accordance with the substantive laws
of the Republic of the Philippines.
The arbitrators shall have no power to add to,
subtract from or otherwise modify the terms of
Agreement or to grant injunctive relief of any nature.
Any judgment upon the award of the
arbitrators may be entered in any court having
jurisdiction thereof, with costs of the arbitration to be
borne equally by the parties, except that each party
shall pay the fees and expenses of its own counsel
in the arbitration.
November 10, 1995 - respondent Zosa
designated his brother, Atty. Francis Zosa, as his
representative while MCHC designated Atty. Inigo S.
Fojas[10] and MCMC nominated Atty. Enrique I.
Quiason[11] as their respective representatives in the
arbitration panel.
But instead of submitting the dispute to
arbitration, respondent Zosa, on April 17, 1996, filed
an action for damages against petitioners before the
RTC OF CEBU[12] to enforce his benefits under
the Employment Agreement.
July 3, 1996 - petitioners filed a motion to
dismiss[13] arguing that (1) the trial court has no
jurisdiction over the instant case since respondent
Zosa's claims should be resolved through arbitration
pursuant to Section 23 of the Employment
Agreement with petitioners; and (2) the venue is
improperly laid since respondent Zosa, like the
petitioners, is a resident of Pasig City thus the case
is cognizable by RTC of PASIG.
July 5, 1996 - respondent Zosa filed an
amended complaint
ISSUE/S:
WON SEC has jurisdiction over the case -
Negative
WON Article 23 of the Employment
Agreement or the Arbitration Clause Valid -
Affirmative
HELD:
The controversy does not in any way involve
the election/appointment of officers of petitioner
MCHC, as claimed by petitioners in their assignment
of errors.
Respondent Zosas amended complaint
focuses heavily on the illegality of the Employment
Agreements Arbitration Clause initially invoked by
him in seeking his termination benefits under
Section 8 of the employment contract.
And under Republic Act No. 876, otherwise
known as the Arbitration Law, it is the regional trial
court which exercises jurisdiction over questions
relating to arbitration.
That jurisdiction lies with the SEC, which is
raised for the first time in this petition, suffice it to
state that the Amended Complaint squarely put in
issue the question whether the Arbitration Clause is
valid and effective between the parties.
Although the controversy which spawned the
action concerns the validity of the termination of the
service of a corporate officer, the issue on the
validity and effectivity of the arbitration clause is
determinable by the regular courts, and do not fall
within the exclusive and original jurisdiction of the
SEC.
The determination and validity of the
agreement is not a matter intrinsically connected
with the regulation and internal affairs of
corporations it is rather an ordinary case to be
decided in accordance with the general laws, and do
not require any particular expertise or training to
interpret and apply.
Decision of the CA affirming the trial courts
assumption of jurisdiction over the case has become
the law of the case which now binds the petitioners.
The law of the case doctrine has been
defined as a term applied to an established rule that
when an appellate court passes on a question and
remands the cause to the lower court for further
proceedings, the question there settled becomes the
law of the case upon subsequent appeal.[27] CAs
decision has already attained finality as evidenced
by a Resolution of this Court ordering entry of
judgment of said case.
Petitioners, therefore, are barred from
challenging anew, through another remedial
measure and in any other forum, the authority of the
regional trial court to resolve the validity of the
arbitration clause.
There is no quarrel that both defendants are
entirely two different corporations with personalities
distinct and separate from each other and that a
corporation has a personality distinct and separate
from those persons composing the corporation as
well as from that of any other legal entity to which it
may be related.
But as the defendants [herein petitioner]
represent the same interest, it could never be
expected, in the arbitration proceedings, that they
would not protect and preserve their own interest,
much less, would both or either favor the interest of
the plaintiff.
The arbitration law, as all other laws, is
intended for the good and welfare of everybody. In
fact, what is being challenged by the plaintiff herein
is not the law itself but the provision of the
Employment Agreement based on the said law,
which is the arbitration clause but only as regards
the composition of the panel of
arbitrators. Arbitration Clause state:
(Go to first page for the Arbitration Clause)
It appears that the two (2) defendants
[petitioners] (MCMC and MCHC) have one (1)
arbitrator each to compose the panel of three (3)
arbitrators.
As the defendant MCMC is the Manager of
defendant MCHC, its decision or vote in the
arbitration proceeding would naturally and certainly
be in favor of its employer and the defendant MCHC
would have to protect and preserve its own interest;
hence, the two (2) votes of both defendants (MCMC
and MCHC) would certainly be against the lone
arbitrator for the plaintiff [herein defendant].
 Hence, apparently, plaintiff [defendant]
would never get or receive justice and fairness in the
arbitration proceedings from the panel of arbitrators
as provided in the aforequoted arbitration clause.
In fairness and justice to the plaintiff
[defendant], the two defendants (MCMC and
MCHC)[herein petitioners] which represent the
same interest should be considered as one and
should be entitled to only one arbitrator to represent
them in the arbitration proceedings.
Accordingly, the arbitration clause, insofar as
the composition of the panel of arbitrators is
concerned should be declared void and of no effect,
because the law says, Any clause giving one of the
parties power to choose more arbitrators than the
other is void and of no effect.
The dispute or controversy between the
defendants (MCMC and MCHC) [herein petitioners]
and the plaintiff [herein defendant] should be settled
in the arbitration proceeding in accordance with the
Employment Agreement, but under the panel of
three (3) arbitrators, one (1) arbitrator to represent
the plaintiff, one (1) arbitrator to represent both
defendants (MCMC and MCHC) [herein petitioners]
and the third arbitrator to be chosen by the plaintiff
[defendant Zosa] and defendants [petitioners].
This issue of estoppel, well- settled is the rule
that issues not raised below cannot be resolved on
review in higher courts.[31]
Secondly, employment agreements such as the
one at bar are usually contracts of adhesion. Any
ambiguity in its provisions is generally resolved
against the party who drafted the document.
A contract of employment, being a contract of
adhesion, is ambiguous, any ambiguity therein
should be construed strictly against the party who
prepared it.
And, finally, respondent Zosa never submitted
himself to arbitration proceedings (as there was
none yet) before bewailing the composition of the
panel of arbitrators.
He in fact, lost no time in assailing the arbitration
clause upon realizing the inequities that may mar the
arbitration proceedings if the existing line-up of
arbitrators remained unchecked.
We need only to emphasize in closing that
arbitration proceedings are designed to level the
playing field among the parties in pursuit of a
mutually acceptable solution to their conflicting
claims.
Any arrangement or scheme that would give
undue advantage to a party in the negotiating table
is anathema to the very purpose of arbitration and
should, therefore, be resisted.
WHEREFORE, premises considered, the
petition is hereby DISMISSED and the decision of
the trial court dated July 18, 1997 is AFFIRMED.
SO ORDERED.
[G.R. No. 141833. March 26, 2003] 399 Scra 562
LM POWER
ENGINEERING CORPORATION, petitioner,
vs. CAPITOL INDUSTRIAL CONSTRUCTION
GROUPS, INC., respondent.
DECISION
The Facts
On February 22, 1983, Petitioner LM Power
Engineering Corporation and Respondent Capitol
Industrial Construction Groups Inc. entered into a
Subcontract Agreement involving electrical work at
the Third Port of Zamboanga.[5]
On April 25, 1985, respondent took over
some of the work contracted to
petitioner.[6] Allegedly, the latter had failed to finish it
because of its inability to procure materials.[7]
Upon completing its task under the Contract,
petitioner billed respondent in the amount
of P6,711,813.90.[8] Contesting the accuracy of the
amount of advances and billable accomplishments
listed by the former, the latter refused to pay.
Respondent also took refuge in the
termination clause of the Agreement.[9] That clause
allowed it to set off the cost of the work that petitioner
had failed to undertake -- due to termination or take-
over -- against the amount it owed the latter.
Because of the dispute, petitioner filed with
the Regional Trial Court (RTC) of Makati (Branch
141) a Complaint[10] for the collection of the amount
representing the alleged balance due it under the
Subcontract.
Instead of submitting an Answer, respondent
filed a Motion to Dismiss,[11] alleging that the
Complaint was premature, because there was no
prior recourse to arbitration.
 In its Order[12] dated September 15, 1987,
the RTC denied the Motion on the ground that the
dispute did not involve the interpretation or the
implementation of the Agreement and was,
therefore, not covered by the arbitral clause.[13]
After trial on the merits, the RTC[14] ruled that
the take-over of some work items by respondent was
not equivalent to a termination, but a mere
modification, of the Subcontract.
The latter was ordered to give full payment
for the work completed by petitioner.
The Issues
In its Memorandum, petitioner raises the
following issues for the Courts consideration:
A
Whether or not there exist[s] a In the case before us, the Subcontract has
controversy/dispute between petitioner and
respondent regarding the interpretation and
implementation of the Sub-Contract Agreement
dated February 22, 1983 that requires prior recourse
to voluntary arbitration;
B amicably shall be settled by means of arbitration x x
In the affirmative, whether or not the
requirements provided in Article III [1] of CIAC
Arbitration Rules regarding request for arbitration
ha[ve] been complied with[.][17]
The Courts Ruling
The Petition is unmeritorious.
First Issue:
Whether Dispute Is Arbitrable
Petitioner claims that there is no conflict
regarding the interpretation or the implementation of
the Agreement.
Thus, without having to resort to prior
arbitration, it is entitled to collect the value of the
services it rendered through an ordinary action for
the collection of a sum of money from respondent.
On the other hand, the latter contends that
there is a need for prior arbitration as provided in the
Agreement.
This is because there are some disparities
between the parties positions regarding the extent of
the work done, the amount of advances and billable
accomplishments, and the set off of expenses
incurred by respondent in its take-over of petitioners
work.
We side with respondent. Essentially, the
dispute arose from the parties ncongruent positions
on whether certain provisions of their Agreement
could be applied to the facts.
The instant case involves technical
discrepancies that are better left to an arbitral body
that has expertise in those areas.
In any event, the inclusion of an arbitration
clause in a contract does not ipso facto divest the
courts of jurisdiction to pass upon the findings of
arbitral bodies, because the awards are still judicially
reviewable under certain conditions.[18]
the following arbitral clause:
6. The Parties hereto agree that any dispute
or conflict as regards to interpretation and
implementation of this Agreement which cannot be
settled between [respondent] and [petitioner]
x.[19]
Clearly, the resolution of the dispute between
the parties herein requires a referral to the provisions
of their Agreement.
Within the scope of the arbitration clause are
discrepancies as to the amount of advances and
billable accomplishments, the application of the
provision on termination, and the consequent set-off
of expenses.
A review of the factual allegations of the
parties reveals that they differ on the following
questions: (1) Did a take-over/termination occur? (2)
May the expenses incurred by respondent in the
take-over be set off against the amounts it owed
petitioner? (3) How much were the advances and
billable accomplishments?
The resolution of the foregoing issues lies in
the interpretation of the provisions of the
Agreement. According to respondent, the take-over
was caused by petitioners delay in completing the
work. Such delay was in violation of the provision in
the Agreement as to time schedule:
G. TIME SCHEDULE
 [Petitioner] shall adhere strictly to the
schedule related to the WORK and complete the
WORK within the period set forth in Annex C
hereof. NO time extension shall be granted by
[respondent] to [petitioner] unless a corresponding
time extension is granted by [the Ministry of Public
Works and Highways] to the CONSORTIUM.[20]
Because of the delay, respondent alleges
that it took over some of the work contracted to
petitioner, pursuant to the following provision in the
Agreement:
K. TERMINATION OF AGREEMENT
[Respondent] has the right to terminate
and/or take over this Agreement for any of the
following causes:
xxxxxxxxx
6. If despite previous warnings by
[respondent], [petitioner] does not execute the
WORK in accordance with this Agreement,
or persistently or flagrantly neglects to carry out [its]
obligations under this Agreement.[21]
Supposedly, as a result of the take-over,
respondent incurred expenses in excess of the
contracted price.
It sought to set off those expenses against
the amount claimed by petitioner for the work the
latter accomplished, pursuant to the following
provision:
If the total direct and indirect cost of
completing the remaining part of the WORK exceed
the sum which would have been payable to
[petitioner] had it completed the WORK, the amount
of such excess [may be] claimed by [respondent]
from either of the following:
1. Any amount due [petitioner] from
[respondent] at the time of the termination of this
Agreement.[22]
The issue as to the correct amount of
petitioners advances and billable accomplishments
involves an evaluation of the manner in which the
parties completed the work, the extent to which they
did it, and the expenses each of them incurred in
connection therewith.
Arbitrators also need to look into the
computation of foreign and local costs of materials,
foreign and local advances, retention fees and
letters of credit, and taxes and duties as set forth in
the Agreement.
These data can be gathered from a review of
the Agreement, pertinent portions of which are
reproduced hereunder:
C. CONTRACT PRICE AND TERMS OF
PAYMENT
xxxxxxxxx
All progress payments to be made by
[respondent] to [petitioner] shall be subject to a
retention sum of ten percent (10%) of the value of
the approved quantities.
Any claims by [respondent] on [petitioner]
may be deducted by [respondent] from the progress
payments and/or retained amount.
Any excess from the retained amount after
deducting [respondents] claims shall be released by
[respondent] to [petitioner] after the issuance of [the
Ministry of Public Works and Highways] of the
Certificate of Completion and final acceptance of the
WORK by [the Ministry of Public Works and
Highways].
xxxxxxxxx
D. IMPORTED MATERIALS AND
EQUIPMENT
[Respondent shall open the letters of credit for the
importation of equipment and materials listed in
Annex E hereof after the drawings, brochures, and
other technical data of each items in the list have
been formally approved by [the Ministry of Public
Works and Highways].
However, petitioner will still be fully
responsible for all imported materials and
equipment.
All expenses incurred by [respondent], both
in foreign and local currencies in connection with the
opening of the letters of credit shall be deducted
from the Contract Prices.
xxxxxxxxx
N. OTHER CONDITIONS
xxxxxxxxx
2. All customs duties, import duties,
contractors taxes, income taxes, and other taxes
that may be required by any government agencies in
connection with this Agreement shall be for the sole
account of [petitioner].[23]
Being an inexpensive, speedy and amicable
method of settling disputes,[24] arbitration -- along
with mediation, conciliation and negotiation -- is
encouraged by the Supreme Court.Aside from
unclogging judicial dockets, arbitration also hastens
the resolution of disputes, especially of the
commercial kind.[25]
It is thus regarded as the wave of the future
in international civil and commercial
disputes.[26] Brushing aside a contractual agreement
calling for arbitration between the parties would be a
step backward.[27]
Consistent with the above-mentioned policy
of encouraging alternative dispute resolution
methods, courts should liberally construe arbitration
clauses.
Provided such clause is susceptible of an
interpretation that covers the asserted dispute, an
order to arbitrate should be granted.[28] Any doubt
should be resolved in favor of arbitration.[29]
Second Issue:
Prior Request for Arbitration
According to petitioner,
assuming arguendo that the dispute is arbitrable,
the failure to file a formal request for arbitration with
the Construction Industry Arbitration Commission
(CIAC) precluded the latter from acquiring
jurisdiction over the question.
To bolster its position, petitioner even cites
our ruling in Tesco Services Incorporated v.
Vera.[30] We are not persuaded.
Section 1 of Article II of the old Rules of
Procedure Governing Construction Arbitration
indeed required the submission of a request for
arbitration, as follows:
SECTION. 1. Submission to Arbitration --
Any party to a construction contract wishing to have
recourse to arbitration by the Construction Industry
Arbitration Commission (CIAC) shall submit its
Request for Arbitration in sufficient copies to the
Secretariat of the CIAC; PROVIDED, that in the case
of government construction contracts, all
administrative remedies available to the parties must
have been exhausted within 90 days from the time
the dispute arose.
Tesco was promulgated by this Court, using
the foregoing provision as reference.
On the other hand, Section 1 of Article III of
the new Rules of Procedure Governing Construction
Arbitration has dispensed with this requirement and
recourse to the CIAC may now be availed of
whenever a contract contains a clause for the
submission of a future controversy to arbitration, in
this wise:
SECTION 1. Submission to CIAC
Jurisdiction An arbitration clause in a construction
contract or a submission to arbitration of a
construction dispute shall be deemed an agreement
to submit an existing or future controversy to CIAC
jurisdiction, notwithstanding the reference to a
different arbitration institution or arbitral body in such
contract or submission.
When a contract contains a clause for the
submission of a future controversy to arbitration, it is
not necessary for the parties to enter into a
submission agreement before the claimant may
invoke the jurisdiction of CIAC.
The foregoing amendments in the Rules
were formalized by CIAC Resolution Nos. 2-91 and
3-93.[31]
The difference in the two provisions was
clearly explained in China Chang Jiang Energy
Corporation (Philippines) v. Rosal Infrastructure
Builders et al.[32] (an extended unsigned Resolution)
and reiterated in National Irrigation Administration v.
Court of Appeals,[33] from which we quote thus:
Under the present Rules of Procedure, for a
particular construction contract to fall within the
jurisdiction of CIAC, it is merely required that the
parties agree to submit the same to voluntary
arbitration.
Unlike in the original version of Section 1, as
applied in the Tesco case, the law as it now stands
does not provide that the parties should agree to
submit disputes arising from their agreement
specifically to the CIAC for the latter to acquire
jurisdiction over the same.
Rather, it is plain and clear that as long as
the parties agree to submit to voluntary arbitration,
regardless of what forum they may choose, their
agreement will fall within the jurisdiction of the CIAC,
such that, even if they specifically choose another
forum, the parties will not be precluded from electing
to submit their dispute before the CIAC because this
right has been vested upon each party by law, i.e.,
E.O. No. 1008.[34]
Clearly, there is no more need to file a
request with the CIAC in order to vest it with
jurisdiction to decide a construction dispute.
The arbitral clause in the Agreement is a
commitment on the part of the parties to submit to
arbitration the disputes covered therein.
Because that clause is binding, they are
expected to abide by it in good faith.[35] And because
it covers the dispute between the parties in the
present case, either of them may compel the other
to arbitrate.[36]
Since petitioner has already filed a
Complaint with the RTC without prior recourse to
arbitration, the proper procedure to enable the CIAC
to decide on the dispute is to request the stay or
suspension of such action, as provided under RA
876 [the Arbitration Law].[37]
WHEREFORE, the Petition is DENIED and the
assailed Decision AFFIRMED. Costs against
petitioner.
G.R. No. 141897 September 24, 2001, 365 Scra
697 METRO CONSTRUCTION, INC., petitioner,
vs. CHATHAM PROPERTIES, INC., respondent.
FACTS :
Respondent Chatham Properties, Inc.
(CHATHAM) and petitioner Metro Construction, Inc.
(MCI) entered into a contract for the construction of
a multi-storey building known as the Chatham
House. In April 1998, MCI sought to collect from
CHATHAM a sum of money for unpaid progress
billings and other charges and instituted a request
for adjudication of its claims with the CIAC.
The preliminary conference before the CIAC
started in June 1998 and was concluded a month
after with the signing of the Terms of Reference
(TOR) of the Case.
In the meantime, the TOR was amended and
finalized on 19 August 1998. The facts, as admitted
by the parties before the CIAC and incorporated in
the original TOR, are as follows :
1. On 21 April 1994, the parties formally
entered into a contract for the construction of the
"Chatham House" . . . for the contract price of price
of P50,000,000.00
2. On 12 July 1994, a Supplemental Contract
was executed by and between the parties whereby
CHATHAM authorized MCI to procure in behalf of
the former materials, equipment, etc.
3. Under Section I.04 of the Supplemental
Contract, the total amount of procurement and
transportation cost[s] and expenses which may be
reimbursed by MCI from CHATHAM shall not
exceed the amount of P75, 000,000.00.
4. In the course of the construction, Change
Orders No. 1, 4, 8A, 11, 12 and 13 were
implemented,
5. CHATHAM reimbursed MCI the amount of
P60,000.00 corresponding to bonuses advanced to
its workers by the latter for the 14th, 16th, and 17th
floors.
6. CHATHAM's payments to MCI totaled
P104,875,792.37, representing payments for
portions of MCI's progress billings and x x x
additional charges..
In the resolution of these issues, the CIAC
discovered significant data, which were not evident
or explicit in the documents and records but
otherwise revealed or elicited during the hearings,
which the CIAC deemed material and relevant to the
complete adjudication of the case
The CIAC disposed of the specific money
claims by either granting or reducing them. On Issue
No. 9, i.e., whether CHATHAM failed to complete
and/or deliver the project within the approved
completion period and, if so, whether CHATHAM is
liable for liquidated damages and how much.
CIAC rendered Judgment in favor of the
Claimant [MCI] directing Respondent [CHATHAM] to
pay Claimant [MCI] the net sum of SIXTEEN
MILLION ONE HUNDRED TWENTY SIX
THOUSAND NINE HUNDRED TWENTY TWO &
91/100 (16,126,922.91) PESOS. Impugning the
decision of the CIAC, CHATHAM instituted a petition
for review with the Court of Appeals

In upholding the decision of the CIAC, the
Court of Appeals confirmed the jurisprudential
principle that absent any showing of arbitrariness,
the CIAC's findings as an administrative agency and
quasi-judicial body should not only be accorded
great respect but also given the stamp of finality.
However the Court of Appeals found
exception in the CIAC's disquisition of Issue No.9 on
the matter of liquidated damages.
ISSUE :
WON under existing law and rules the Court
of Appeals can also review findings of facts of the
Construction Industry Arbitration Commission
(CIAC)
HELD :
EO. No. 1008 vest upon the CIAC original
and exclusive jurisdiction over disputes arising from,
or connected with, contracts entered into by parties
involved in construction in the Philippines, whether
the dispute arises before or after the completion of
the contract, or after the abandonment or breach
thereof.
By express provision of Section 19 thereof,
the arbitral award of the CIAC is final and
unappealable, except on questions of law, which are
appealable to the Supreme Court.
The parties, however, disagree on whether
the subsequent Supreme Court issuances on
appellate procedure and R.A. No. 7902 removed
from the Supreme Court its appellate jurisdiction in
Section 19 of E.O. No. 1008 and vested the same in
the Court of Appeals, and whether appeals from
CISC awards are no longer confined to questions of
law.
Through Circular No. 1-91, the Supreme
Court intended to establish a uniform procedure for
the review of the final orders or decisions of the
Court of Tax Appeals and other quasi judicial.
The Circular designated the Court of Appeals
as the reviewing body to resolve questions of fact or
of law or mixed questions of fact and law.
It is clear that Circular No. 1-91 covers the
CIAC. In the first place, it is a quasi judicial agency.
In the second place, the language of Section 1 of
Circular No. 1-91 emphasizes the obvious inclusion
of the CIAC even if it is not named in the
enumeration of quasi-judicial agencies.
In sum, under Circular No. 1-91, appeals
from the arbitral awards of the CIAC may be brought
to the Court of Appeals, and not to the Supreme
Court alone. The grounds for the appeal are likewise
broadened to include appeals on questions of facts
and appeals involving mixed questions of fact and
law
The jurisdiction of the Court of Appeals over
appeals from final orders or decisions of the CIAC is
further fortified by the amendments to B.P. Blg. 129,
as introduced by RA. No. 7902.
With the amendments, the Court of Appeals
is vested with appellate jurisdiction over all final
judgments, decisions, resolutions, orders or awards
of Regional Trial Courts and quasi-judicial agencies,
instrumentalities, boards or commissions, except
"those within the appellate jurisdiction of the
Supreme Court in accordance with the Constitution,
the Labor Code of the Philippines under Presidential
Decree No. 442, as amended, the provisions of this
Act, and of subparagraph (1) of the third paragraph
and subparagraph (4) of the fourth paragraph of
Section 17 of the Judiciary Act of 1948.".
In view of all the foregoing, The Supreme
Court rejects MCI's submission that Circular No. 1-
91, B.P. Blg. 129, as amended by RA. 7902, Revised
Administrative Circular 1-95, and Rule 43 of the
1997 Rules of Civil Procedure failed to efficaciously
modify the provision on appeals in E.O. No. 1008.
318 Scra 558 HOME BANKERS SAVINGS
AND TRUST COMPANY V. CA (G.R. NO. 115412)
Facts:
Victor Tancuan issued Petitioner Home
Bankers Savings and Trust Company a check while
Eugene Arriesgado issued Private Respondent Far
East Bank and Trust Company three checks; both
checks totaling the amount of P25,250,000.00.
Tancuan and Arriesgado exchanged each
other’s checks and deposited them with their
respective banks for collection. When FEBTC
presented Tancuan’s HBSTC check for clearing, it
was dishonored for being DAIF.
Meanwhile, HBSTC sent Arriesgado’s 3
FEBTC checks through the Philippine Clearing
House Corporation (PCHC) to FEBTC but was
returned for being DAIF.
HBSTC receive the notice of dishonor but
refused to accept the checks and returned them to
FEBTC through the PCHC for the reason “Beyond
Reglementary Period,” implying that HBSTC already
treated the 3 checks as cleared and allowed the
proceeds thereof to be withdrawn.
FEBTC demanded reimbursement for the
returned checks and inquired from HBSTC whether
it had permitted any withdrawal of funds against the
unfunded checks.
HBSTC, however refused to make any
reimbursement and to provide FEBTC with the
needed information.
Thus, FEBTC submitted the dispute for
arbitration before the PCHC Arbitration Committee,
under its Supplementary Rules on Regional Clearing
to which FEBTC and HBSTC are bound as
participants in the regional clearing operations
administered by the PCHC.
While the arbitration proceeding was still
pending, FEBTC filed an action for sum of money
and damages with preliminary attachment against
HBSTC.
HBSTC moved to dismiss on the ground that
there is no cause of action and because it seeks to
enforce an arbitral award which as yet does not
exist. The trial court denied the motion to dismiss
and the motion for reconsideration. Petitioner then
filed a petition for certiorari with respondent CA to
which it had dismissed.
Issue:
Whether or not private respondent which
commenced an arbitration proceeding under the
auspices of the PCHC may subsequently file a
separate case in court over the same subject matter
despite the pendency of that arbitration, simply to
obtain the provisional remedy of attachment against
the adverse party in the arbitration proceeding.
Ruling:
We find no merit in the petition. Section 14 of
Republic Act 876, otherwise known as the
Arbitration Law, allows any party to the arbitration
proceeding to petition the court to take measures to
safeguard and/or conserve any matter which is the
subject of the dispute in arbitration.
Petitioner’s exposition of the foregoing
provision deserves scant consideration. Section 14
simply grants an arbitrator the power to issue
subpoena and subpoena duces tecum at any time
before rendering the award.
The exercise of such power is without
prejudice to the right of a party to file a petition in
court to safeguard any matter which is the subject of
the dispute in arbitration.
In the case at bar, private respondent filed an
action for a sum of money with prayer for a writ of
preliminary attachment. Undoubtedly, such action
involved the same subject matter as that in
arbitration, i.e., the sum of P25,200,000.00 which
was allegedly deprived from private respondent in
what is known in banking as a “kiting scheme.”
However, the civil action was not a simple
case of a money claim since private respondent has
included a prayer for a writ of preliminary
attachment, which is sanctioned by section 14 of the
Arbitration Law.
Simply put, participants in the regional
clearing operations of the Philippine Clearing House
Corporation cannot bypass the arbitration process
laid out by the body and seek relief directly from the
courts.
In the case at bar, undeniably, private
respondent has initiated arbitration proceedings as
required by the PCHC rules and regulations, and
pending arbitration has sought relief from the trial
court for measures to safeguard and/or conserve the
subject of the dispute under arbitration, as
sanctioned by section 14 of the Arbitration Law, and
otherwise not shown to be contrary to the PCHC
rules and regulations.
At this point, we emphasize that arbitration,
as an alternative method of dispute resolution, is
encouraged by this Court.
Aside from unclogging judicial dockets, it
also hastens solutions especially of commercial
disputes. The Court looks with favor upon such
amicable arrangement and will only interfere with
great reluctance to anticipate or nullify the action of
the arbitrator.
Wherefore, premises considered, the petition
is hereby dismissed and the decision of the court a
quo is affirmed.
TOYOTA MOTOR PHILIPPINES CORPORATION
V. CA (G.R. NO. 102881) 216 Scra 236
Facts:
This case involves a boundary dispute
between petitioner Toyota Motor Phil. Corporation
(Toyota) and private respondent Sun Valley
Manufacturing and Development Corporation (Sun
Valley).
Both Toyota and Sun Valley are the
registered owners of two (2) adjoining parcels of land
which they purchased from the Asset Privatization
Trust (APT). The properties in question formerly
belonged to Delta Motors Corporation (DMC) which
were foreclosed by the Philippine National Bank
(PNB) and later transferred to the national
government through the APT for disposition.
APT then proceeded to classify the DMC
properties, called the GC III-Delta Motors
Corporation, and divided into Delta I, Delta II, and
Delta III. Further subdivisions for the separate
catalogues were made for each division e.g. Delta I
into Lots 1, 2 and 3. After this classification, APT
parcelled out and catalogued the properties for
bidding and sale.
Part of the duly parcelled Delta I property (Lot
2) was sold to Toyota through public bidding. After
its purchase, Toyota constructed a concrete hollow
block (CHB) perimeter fence around its alleged
property. Another part of the parcelled Delta I (Lot 1)
was purchased by Sun Valley from APT.
Petitioner then filed a case against APT for
the reformation of the Deed of Sale executed
between them alleging that the instrument failed to
reflect the true intention of the parties as the title
failed to include 723 square meters strip of land.
On the other hand, Sun Valley, filed a case
for recovery of possession of the disputed 723
square meters relying upon the title description of its
property and the surveys it has commissioned.
Through legal maneuverings, the parties
have succeeded in muddling up the vital issues of
the case and getting the lower courts embroiled in
numerous appeals over technicalities.
Hence, the three appellate
decisions/resolutions before the Court for review
and conflicting orders issued by lower courts as a
result of the separate cases filed by the parties.
Issue:
Whether or not Judge Tensuan had
jurisdiction to take cognizance of the case for
reformation of instrument.
Ruling:
Attention must first be brought to the fact that the
contract of sale executed between APT and Toyota
provides an arbitration clause which states that:
5. In case of disagreement or conflict arising out
of this Contract, the parties hereby undertake
to submit the matter for determination by a
committee of experts, acting as arbitrators,
the composition of which shall be as follows:
a) One member to be appointed by the
VENDOR; b) One member to be appointed
by the VENDEE; c) One member, who shall
be a lawyer, to be appointed by both of the
aforesaid parties;
The contention that the arbitration clause has
become dysfunctional because of the presence of
third parties is untenable.
Toyota filed an action for reformation of its
contract with APT, the purpose of which is to look
into the real intentions/agreement of the parties to
the contract and to determine if there was really a
mistake in the designation of the boundaries of the
property as alleged by Toyota.
Such questions can only be answered by the
parties to the contract themselves. This is a
controversy which clearly arose from the contract
entered into by APT and Toyota. Inasmuch as this
concerns more importantly the parties APT and
Toyota themselves, the arbitration committee is
therefore the proper and convenient forum to settle
the matter as clearly provided in the deed of sale.
Having been apprised of the presence of the
arbitration clause in the motion to dismiss filed by
APT, Judge Tensuan should have at least
suspended the proceedings and directed the parties
to settle their dispute by arbitration. Judge Tensuan
should have not taken cognizance of the case.
In view of all the foregoing, the petition is
hereby dismissed for failure to show reversible error,
much less grave abuse of discretion, on the part of
the respondent court.
DEL MONTE CORP. USA vs. CA, 351 Scra 373
GR No. 136154 | Feb 7, 2001 | Petition for Review
on Certiorari | Bellosillo
Petitioners: Del Monte Corp. USA, Paul Derby
Jr., Daniel Collins & Luis Hidalgo
Respondents: CA, Malabon RTC Branch
74 Judge Bienvenido Reyes,
MontebuenoMarketing, Inc., LiongLiong C. Sy
and SabrosaFodds, Inc.
Facts:
 1 July 1994 - in a Distributorship Agreement,
Del Monte Corporation-USA (DMC-USA)
appointed Montebueno Marketing, Inc.
(MMI) as the sole and exclusive distributor of
its Del Monte products in the Philippines for
a period of five (5) years, renewable for two
(2) consecutive five (5) year periods with the
consent of the parties.
 Said agreement provided for an arbitration
clause, which states:
This Agreement shall be governed by the laws of
the State of California and/or, if applicable, the
United States of America. All disputes arising out of
or relating to this Agreement or the parties’
relationship, including the termination thereof, shall
be resolved by arbitration in the City of San
Francisco, State of California, under the Rules of the
American Arbitration Association.
The arbitration panel shall consist of three
members, one of whom shall be selected by DMC-
USA, one of whom shall be selected by MMI, and
third of whom shall be selected by the other two
members and shall have relevant experience in the
industry
 October 1994 - appointment of MMI as the
sole and exclusive distributor of Del Monte
products in the Philippines was published in
several newspapers in the country.
 Immediately after its appointment, MMI
appointed Sabrosa Foods, Inc. (SFI), with
the approval of DMC-USA, as MMI’s
marketing arm to concentrate on its
marketing and selling function as well as to
manage its critical relationship with the trade.
1Art.20. Every person who, contrary to law, wilfully or negligently
causes damage to another, shall indemnify the latter for the same.
2Art.21. Any person who wilfully causes loss or injury to another
in a manner that is contrary to morals, good customs or public
policy shall compensate the latter for the damage.
 3 October 1996 - MMI, SFI and MMI’s
Managing Director LiongLiong C. Sy (LILY
SY) filed a Complaint against DMC-USA,
Managing Director of Del Monte
Corporation’s Export Sales DepartmentPaul
E. Derby, Jr.,Regional Director of Del Monte
Corporation’s Export Sales
DepartmentDaniel Collins, Head of Credit
Services Department of Del Monte
Corporation Luis Hidalgo and Dewey Ltd.
before Malabon RTC.
 MMI et al. predicated their complaint on the
alleged violations by Del Monte et al. of
Articles 201, 212 and 233 of the Civil Code.
According to them, DMC-USA products
continued to be brought into the country by parallel
importers despite the appointment of MMI as the
sole and exclusive distributor of Del Monte products
thereby causing them great embarrassment and
substantial damage.
They alleged that the products brought into the
country by these importers were aged, damaged,
fake or counterfeit, so that in March 1995 they had
to cause, after prior consultation with Antonio
Ongpin, Market Director for Special Markets of Del
Monte Philippines, Inc., the publication of a "warning
to the trade" paid advertisement in leading
newspapers. DMC-USA and Paul E. Derby, Jr.,
apparently upset with the publication, instructed
private respondent MMI to stop coordinating with
Antonio Ongpin and to communicate directly instead
with DMC-USA through Paul E. Derby, Jr.
 MMI et al. further averred that:
1. DMC-USA et al. knowingly and
surreptitiously continued to deal with the
former in bad faith by involving
disinterested third parties and by
proposing solutions which were entirely
out of their control
2. they had exhausted all possible avenues
for an amicable resolution and settlement
of their grievances
3Art. 23. Even when an act or event causing damage to another's
property was not due to the fault or negligence of the defendant,
the latter shall be liable for indemnity if through the act or event
he was benefited.

3. as a result of the fraud, bad faith, malice
and wanton attitude of DMC-USA et al.,
they should be held responsible for all the
actual expenses incurred by MMI et al. in
the delayed shipment of orders which
resulted in the extra handling thereof, the
actual expenses and cost of money for
the unused Letters of Credit (LCs) and
the substantial opportunity losses due to
created out-of-stock situations and
unauthorized shipments of Del Monte-
USA products to the Philippine Duty Free
Area and Economic Zone
4. the bad faith, fraudulent acts and willful
negligence of DMC-USA et al., motivated
by their determination to squeeze MMI et
al. out of the outstanding and on-going
Distributorship Agreement in favor of
another party, had placed Lily Sy on
tenterhooks since then
5. the shrewd and subtle manner with which
DMC-USA et al. concocted imaginary
violations by MMI of the Distributorship
Agreement in order to justify the untimely
termination thereof was a subterfuge
 21 October 1996 – DMC-USA et al. filed
a Motion to Suspend Proceedings, invoking
the arbitration clause.
 RTC: deferred consideration of DMC-USA et
al.’s Motion to Suspend Proceedings as the
grounds alleged therein did not constitute the
suspension of the proceedings considering
that the action was for damages with prayer
for the issuance of Writ of Preliminary
Attachment and not on the Distributorship
Agreement
 DMC-USA et al. filed a MR to which MMI et
al. filed their comment/opposition.
 DMC-USA et al. filed a reply. They later on
filed a Motion to Admit Supplemental
Pleading.
 Said motion was admitted.
 As a result of the admission of
the Supplemental Complaint, DMC-USA et
al. filed on 22 July 1997
a Manifestation adopting their Motion to
Suspend Proceedings of 17 October 1996
and Motion for Reconsideration of 14
January 1997.
 11 November 1997 - the Motion to Suspend
Proceedings was denied by the trial court on
the ground that it "will not serve the ends of
justice and to allow said suspension will only
delay the determination of the issues,
frustrate the quest of the parties for a
judicious determination of their respective
claims, and/or deprive and delay their rights
to seek redress.
 On appeal, the CA affirmed the RTC
decision.
 Hence, this petition.
Issue:
WON the dispute between the parties
warrants an order compelling them to submit to
arbitration [NO]
Ratio:
 There is no doubt that arbitration is valid and
constitutional in our jurisdiction. Even before
the enactment of RA 876, this Court has
countenanced the settlement of disputes
through arbitration.
Unless the agreement is such as
absolutely to close the doors of the courts
against the parties, which agreement would
be void.
The courts will look with favor upon
such amicable arrangement and will only
interfere with great reluctance to anticipate or
nullify the action of the arbitrator.
Moreover, as RA 876 expressly
authorizes arbitration of domestic disputes,
foreign arbitration as a system of settling
commercial disputes was likewise
recognized when the Philippines adhered to
the United Nations "Convention on the
Recognition and the Enforcement of Foreign
Arbitral Awards of 1958" under the 10 May
1965 Resolution No. 71 of the Philippine
Senate.
 Giving reciprocal recognition and
allowing enforcement of international
arbitration agreements between parties of
different nationalities within a contracting
state.
 A careful examination of the instant case
shows that the arbitration clause in the
Distributorship Agreement between DMC-
USA and MMI is valid and the dispute
between the parties is arbitrable. However,
this Court must deny the petition.
 The Agreement between DMC-USA and
MMI is a contract. The provision to
submit to arbitration any dispute arising
therefrom and the relationship of the
parties is part of that contract and is itself
a contract. As a rule, contracts are
respected as the law between the
contracting parties and produce effect as
between them, their assigns and heirs.
 Clearly, only parties to the Agreement, i.e.,
DMC-USA and its Managing Director for
Export Sales Paul E. Derby, Jr., and MMI and
its Managing Director LILY SY are bound by
the Agreement and its arbitration clause as
they are the only signatories thereto.
o Daniel Collins and Luis Hidalgo, and
SFI, not parties to the Agreement and
cannot even be considered assigns
or heirs of the parties, are not bound
by the Agreement and the arbitration
clause therein.
 Consequently, referral to
arbitration in the State of
California pursuant to the
arbitration clause and the
suspension of the proceedings in
Civil Case No. 2637-MN pending
the return of the arbitral award
could be called for but only as to
DMC-USA and Paul E. Derby, Jr.,
and MMI and LILY SY, and not as
to the other parties in this case, in
accordance with the recent case
of Heirs of Augusto L. Salas, Jr. v.
Laperal Realty Corporation, which
superseded that of Toyota Motor
Philippines Corp. v. Court of Appeals.
o In Toyota, the Court ruled that "[t]he
contention that the arbitration clause
has become dysfunctional because
of the presence of third parties is
untenable ratiocinating that
"[c]contracts are respected as the law
between the contracting parties “and
that "[a]s such, the parties are
thereby expected to abide with good
faith in their contractual
commitments."
o However, in Salas, Jr., only parties to
the Agreement, their assigns or heirs
have the right to arbitrate or could be
compelled to arbitrate. The Court
went further by declaring that in
recognizing the right of the
contracting parties to arbitrate or
to compel arbitration, the splitting
of the proceedings to arbitration
as to some of the parties on one
hand and trial for the others on the
other hand, or the suspension of
trial pending arbitration between
some of the parties, should not be
allowed as it would, in effect,
result in multiplicity of suits,
duplicitous procedure and
unnecessary delay.
 The object of arbitration is to allow the
expeditious determination of a dispute.
Clearly, the issue before us could not be speedily
and efficiently resolved in its entirety if we allow
simultaneous arbitration proceedings and trial, or
suspension of trial pending arbitration.
Accordingly, the interest of justice would only be
served if the trial court hears and adjudicates the
case in a single and complete proceeding.
Dispositive:Petition denied.